So at least one UK computer dealer out there can still turn a profit from flogging hardware. Step forward London-based Business Systems Group (BSG), which noted a fall in gross margins from 22 per cent to 18 per cent in its interims, thanks to “especially strong hardware sales in the first quarter”.

At the same time, its value-added, or “solutions” business, experienced a drop in H1 revenues compared to last time around. This is not the way it is supposed to be for resellers listed on the stock market. Analysts expect like to see resellers moving the revenue mix more into high margin software and services. Failure to make the transition quickly enough is punished – hence the wish of Computacenter’s founders and senior managers, confirmed last week, to take the company private.

Fortunately, for BSG, there is another string to the bow: a service business, bought in August 2004 from Global Network Solutions Europe. This delivered revenues of £5.1m for the six months to 30 September 2005. Total revenues jumped 49 per cent to 18.8m (H1 2004: £12.6m), with organic growth pegged at 18 per cent.

Hardware sales performance has returned to normal levels since the first quarter, so BSG is expecting gross margins to rise again. It has cut costs in the Solutions Business to minimise the profit impact of lower revenues. But sales resources have been increased as this business “continues to be important to the Group”. ®